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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1012557519687

Ruling

Subject: Private health insurance tax offset

Question:

Are you entitled to a private health insurance reduction of a certain amount in the year ended 30 June 2013?

Answer:

No.

This ruling applies for the following periods

Year ended 30 June 2013.

The scheme commences on

1 July 2012.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are a private health insurance incentive beneficiary (PHIIB). A PHIIB is specifically defined in Section 22-5 of the Private Health Insurance Act 2007 (PHIA 2007).

You are aged under 65.

You advised your private health fund what your income level was; by doing this you claimed a premium reduction with your private health insurance fund by nominating your income tier. You received a premium reduction of 30% up front with your private health insurance fund and this amounted to a premium reduction of a certain amount.

Your notice of assessment for the year ended 30 June 2013 issued on a certain date. The notice of assessment included as a liability an amount for 'Excess private health reduction or refund (rebate reduced) of a certain amount'.

For the year ended 30 June 2013 your assessable income was a positive amount.

For the year ended 30 June 2013 your deductions was far greater than your assessable income. These deductions were a net rental property loss

For the year ended 30 June 2013 your taxable income was zero.

For the year ended 30 June 2013 you had a tax loss.

Your income for surcharge purposes for the private health insurance rebate (PHIR) in the year ended 30 June 2013 is the equivalent of your tax loss as a positive amount.

Your spouse's income for surcharge purposes for private health insurance rebate in the year ended 30 June 2013 is a certain amount.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 159P,

Income Tax Assessment Act 1997 Section 4-15,

Income Tax Assessment Act 1997 Section 6-5,

Income Tax Assessment Act 1997 Section 8-1,

Income Tax Assessment Act 1997 Division 36,

Income Tax Assessment Act 1997 Subdivision 61G,

Income Tax Assessment Act 1997 Section 995-1,

Private Health Insurance Act 2007 Section 22-5,

Private Health Insurance Act 2007 Section 22-10,

Private Health Insurance Act 2007 Section 22-15,

Private Health Insurance Act 2007 Section 22-30,

Private Health Insurance Act 2007 Section 22-35,

Private Health Insurance Act 2007 Section 22-40,

Private Health Insurance Act 2007 Subdivision 282-AA61G,

Private Health Insurance Act 2007 Section 282-16 and

Private Health Insurance Act 2007 Section 282-18.

Reasons for decision

Summary

You are not entitled to a private health insurance reduction of a certain amount in the year ended 30 June 2013 because your income for surcharge purposes is above the private health insurance family income tier 3 threshold.

Detailed reasoning

Your entitlement to a private health insurance tax offset in the year ended 30 June 2013 is income tested. If you earn too much income for surcharge purposes, you are not eligible to receive a private health insurance tax offset.

The Private health insurance family thresholds are defined in Section 22-30 of the PHIA 2007 and are subject to indexing each year, section 22-45 of the PHIA 2007.

For the year ended 30 June 2013, the family tier 3 threshold is $260,001. As your combined income for surcharge purposes (income for surcharge purposes is what is used to calculate the family income for PHIR purposes and is defined in Section 995-1 of the ITAA 1997) is above this threshold you are not entitled to any private health insurance tax offset.

To calculate your income for surcharge purposes the combined amounts for you and your spouse are included for each of the following:

For you, your income for surcharge purposes is calculated as follows:

Your spouse's income for surcharge purposes is calculated as follows:

Subdivision 282-AA of the PHIA 2007 gives the Australian Taxation Office (ATO) authority to administer and recover any liability for excess private health insurance reduction.

In your circumstances an amount representing the amount of your up front premium discount has been correctly recovered by the ATO.

A recent Small Taxation Claims Tribunal decision AAT Decision [2013] AATA 0046 - Reilly v Commissioner of Taxation amongst other things discussed and decided the issue of 'whether taxable income can be a negative amount' and found that the method statement in the 'taxable income provision in subsection 4-15(1) of the ITAA 1997 is clear in stating 'If the deductions equal or exceed the assessable income, you don't have a taxable income'.

In your circumstances your taxable income of zero and your tax loss (which you may be able to deduct in a later income year, see Division 36 of the ITAA 1997) is quite different to your income for surcharge purposes which is used to calculate any of your entitlements to private health insurance tax offset and medical expenses tax offset.

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